However, this change reduces the burden of paying a large amount in a single transaction for those who do not want to opt.” That’s not all. More often than not, while buying a new car, the auto-companies push their in-house motor insurance
down the buyer’s throat for the long term.
Sajja Praveen Chowdary, motor business head, Policybazaar.com, says: “This practice significantly increased the cost of the new purchase.” So in a way, these long term motor insurance
packages should be discontinued. Sharma says, “I believe that this change will benefit the customers as they will have more choice in case they have not received satisfactory service from their previous insurer and switch their insurer for own damage cover.”
Yet, a few experts also feel that this additional choice for the customer has now been removed. Naval Goel, CEO, PolicyX.com says: “Those likely to buy longer-term policies, will not have an option to buy the three or five-year comprehensive plans. Although, not many prefer this option while buying a new car to keep the initial cost low.”
While this move will increase the uncertainty of the second-year premium for a customer, it will increase competition among insurance companies for the second-year premium.
Impact on new car buyers
Sanjay Datta, chief — underwriting, claims and reinsurance — ICICI Lombard says: “This would mean that the insured though would have multi-year third-year insurance for the new vehicle purchased, the own-damage portion of the policy has to be renewed every year for the adequate coverage of the vehicle.” Due to the reduction of the number of years of OD cover the overall outflow of premium amount in the first year for the insured would reduce. “However, due to recurring OD renewal over subsequent years the OD premium would get distributed,” said Datta.
For cars bought between September 1, 2018, and July 31, 2020, Chowdary says: “The coverage for those policies will continue, as per the terms and conditions till the time of expiry of the policy.” The coverage will be intact as per the policy bond issued by the insurer.